“He was at once arrogant, supercilious and obtuse,” Deputy president McCabe said of Mr Legat’s behaviour.
“Mr Legat did not respect the law and the institutions that administer it. He presented as a recalcitrant who thinks he knows better. That finding does not bode well for an individual seeking to overturn a banning order … he has persisted in an increasingly shambolic defence of the indefensible in these proceedings.”
The scheme, which Deputy president McCabe described as “too clever by half,” involved a transaction where customers would incur a debt and walk out with cash in hand.
Customers would enter FAF, ASIC said, and typically enquire about a short-term loan, commonly known as pay-day loans.
Instead customers would be offered the opportunity to buy, on credit, diamonds that were kept off-site.
The FAF representative would then draw up a purchase contract and the customer would sign up and become the owner of the diamonds. They would then walk to the other side of the shop and sell their newly acquired diamonds for cash.
This means if a customer bought $2000 in diamonds on credit, they would walk across the shop, receive a cash payment of $1000 for the same diamonds, and a $2000 debt, according to ASIC.
This meant FAF effectively issued high interest loans to customers who might have otherwise struggled to obtain credit.
“This was the supposed genius of the plan,” Deputy president McCabe said, of what he labelled ‘the Diamond Model’ which FAF abandoned in 2012.
“Mr Legat’s companies and their associates would not need to hold an Australian Credit Licence or otherwise comply with the consumer credit laws because they were dealing in diamonds, not providing credit.
“Mr Legat’s conduct – particularly the lack of contrition and the absence of any insight into his behaviour – suggests a longer term of disqualification is appropriate. He needs to be taught a lesson and the prospect of a three-year ban is unlikely to have the desired result,” he said.
The Federal Court previously found the transaction had the effect of allowing interest well over the 48 per cent cap, with some loans attracting interest as much as 1000 per cent without adding anything to the transaction.
Mr Legat said he was still weighing an appeal, and that the comments made by the tribunal were “disappointing and hurtful”.
“I am considering whether I have been denied procedural fairness and natural justice in the decision.”
Senior Manager at ASIC, Kaan Finney, said during the trial “the witnesses expressed their confusion at the mention of diamonds, given that they were seeking a loan and no actual diamonds were ever shown to them”.
David Estcourt works for The Age and The Sydney Morning Herald.